China to introduce new overseas listing rules for mainland firms from end-March
The CSRC will implement a new regulation from March 31 for mainland companies seeking to list overseas, paving way for more mainland firms to enter Hong Kong and US markets.
The China Securities Regulatory Commission (CSRC) will implement a new regulation from March 31 for mainland companies wanting to list overseas, clarifying the rules for more firms to enter offshore markets, including Hong Kong and the US.
Under the new regulation announced by the CSRC late on Friday, mainland companies can choose which overseas markets they want to list in but they must register their intention with the CSRC in advance.
In addition, they will also need to get approval from their own industry regulator. For example, a tech company that wants to list overseas will need approval from the Cyberspace Administration of China (CAC) that such a listing would not contravene China’s strict data security laws.
The new rule is aimed at clarifying the rules for mainland companies on how they can raise funds in Hong Kong, the US and other overseas markets, a CSRC spokesman said in a statement.
The move comes after months of scrutiny amid rising political tensions between Washington and Beijing. Ride-hailing giant Didi Global had to delist from the New York Stock Exchange in 2022, where it raised US$4.4 billion in a public listing, after Beijing launched a cybersecurity probe into the company.
“The new overseas listing regulation reflects that China will not change the direction of opening its capital markets and allowing mainland firms to raise funds from international investors to share the growth story of the country,” a CSRC spokesman said in the statement.
The CSRC and Hong Kong’s Securities and Futures Commission on Friday also signed a memorandum of understanding, clarifying the arrangements and procedures for mainland companies that want to list in Hong Kong. The agreement will clarify how the two regulators work together to conduct cross-boundary enforcement, supervision of intermediaries and exchange of information.
“The MOU will facilitate the CSRC and the SFC in discharging their supervisory functions, jointly combating cross-boundary offences and misconduct, safeguarding the legitimate interests of investors and ensuring the steady and healthy development of both markets,” according to a joint statement between the CSRC and the SFC.
Prior to Friday’s announcement, Chinese companies had stopped listing in the US, while some mainland technology companies delayed their Hong Kong listing plans in the wake of the probe into Didi Global.
“The new CSRC rule will clear up uncertainties about how mainland companies with sensitive information can list in the US and Hong Kong,” said Tom Chan Pak-lam, permanent honourable president of the Institute of Securities Dealers in Hong Kong, an industry body. “This is a positive move as it will encourage more new listings in Hong Kong and the US.”
Those companies that have already listed in overseas markets will not be affected by the new rule – which becomes effective March 31. However, they will need to register with the CSRC if they want to raise fresh funds in overseas markets in future.
Companies that already have regulatory approval in Hong Kong or the US but which have not yet listed, will receive a six-month grace period from the CSRC allowing them to list in that timespan. If they fail to list before the deadline, they will need to follow the new rule.
Separately, the CSRC said on Friday it will implement a registration-based IPO system immediately for stock exchanges in Shanghai, Beijing and Shenzhen after gaining support for the proposal from a consultation period that ended on Thursday.
Meanwhile, the US and China resolved their audit dispute in December, removing the risk of more US delistings for mainland companies. This should also encourage more mainland firms to list in the US, Chan said.